The new UPS labor agreement with the Teamsters union will be a big topic of discussion on the company’s second-quarter earnings call.
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United Parcel Service
‘s second-quarter sales, earnings, and guidance weren’t good enough for investors. The stock was tumbling in premarket trading.
UPS (ticker: UPS) on Tuesday reported adjusted earnings of $2.54 a share from sales of $22.1 billion. Wall Street was looking for EPS of $2.49 a share on sales of $23 billion, according to FactSet. A year ago, UPS reported a per-share profit of $3.29 a share from sales of $24.7 billion.
Lower volumes are to blame for lower sales. Average daily package volume in the U.S. dropped 9.9% year over year, worse than the 5.4% decline in the first quarter of 2023.
Pricing offset some of that decline. U.S. pricing was up 3.3% in the second quarter and 4.8% in the first quarter.
For the full year, UPS expects revenue of about $93 billion and operating margins of around 11.8%. In April, that guidance was $97 billion and 12.8%, respectively.
Sales, earnings, deliveries, and pricing trends are all going the wrong way. That is unnerving investors. UPS shares were down 6.3% in early trading.
S&P 500
and
Dow Jones Industrial Average
futures fell about 0.4%.
The new five-year labor deal between UPS and the Teamsters union agreed to in July is as important as current results.
“We are pleased to have reached agreement with the Teamsters,” said CEO Carol Tome in a news release. “UPS is stronger than ever. Looking ahead, we will stay on strategy to capture growth in the most attractive parts of the market and make our global integrated network even more efficient.”
There isn’t a lot of new detail about cost increases or productivity gains from the new deal in the news release. Investors might have to wait until the quarterly earnings conference call slated for 8:30 a.m. Eastern time to hear more.
Wages are set to rise at an annual average rate of roughly 6% over the course of the contract. That means higher costs, but Wall Street hasn’t really changed its forecasts for earnings based on the labor deal. For 2024, Wall Street projects earnings of $11.64, down less than 1% from $11.71 a few weeks ago. Analysts are probably waiting to hear from the company to make significant adjustments.
UPS results aren’t great news for the economy. Things haven’t turned a corner yet. The weakening economy has weighed on UPS stock. Coming into Tuesday trading, UPS shares are down about 7% since the company reported first-quarter numbers. The
S&P 500
is up about 9% over the same span. UPS shares dropped about 10% on the day of the report. They are actually about $6 since the initial reaction.
Write to Al Root at [email protected]
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